Buying a property is simple on paper; all you need to do is obtain the funds so you can move forward. In reality, obtaining a mortgage is slightly more complex, and one of the reasons for this is how you plan to buy property and what you plan to buy.
Because buying a commercial property is not the same as buying a home to reside in, and buying a second property has other complexities, as does buying investment properties.
This post is going to take a look at some of the different financing options available to you for your next property purchase, whether you’re upgrading to a larger home or you want to buy a plot of land. Let’s take a look at what you might find appropriate.
Standard Mortgage
Most people start here. This is the most common type of mortgage in the UK, with prospective homeowners typically opt for a standard mortgage with a deposit of anywhere upwards of 5% (usually 10-20%) and a typical 25-year repayment term.
Lenders will approve those with a good credit history and proof they can afford the repayments by looking at spending and debt levels to make a better decision, and this in itself is quite a time-consuming and complex process.
It’s not fast, it’s long and stressful, and there’ll be a lot of nail biting. But for those who are successful, it’s the first step on the property ladder.
Bridging Loans for Auction Buys
If you’re planning on purchasing property at an auction, you need to know that the process is much faster than standard purchases, and this means you need to be ready. There’s no time to wait for a bank’s approval. You need to get funds fast, as you need to complete the purchase within 28 days.
This is where a bridging loan for auction property purchases comes into play. A bridging loan is a short-term loan that helps you fund your auction purchase and bridges the gap between the hammer going down and your traditional mortgage being approved. It’s fast, it usually has higher interest rates, and it’s absolutely not a long-term solution. You will need to source other funding to pay back the loan; however, they are ideal for investors who need to move fast.
Development Finance and Joint Ventures
Looking at purchasing land or a fixer-upper? Then you might need the help of development finance over a standard mortgage. Development finance can help to fund restoration projects or construction costs, and it is usually released in stages, and these stages are tied to the progress.
Lenders will require detailed plans and a budget before approving any financing too and its not always an easy route.
A joint venture is when two or more parties join up to share costs, risks, and profits. For most joint ventures, this usually involves the money partner and the project manager, but this isn’t exclusive to these roles. It is, however, a practical option for those who have the ideas but not the funding available to them.
